DrumBeat: February 22, 2009

Berkeley, Calif. - Remember last summer, when gas prices broke new records every day and the era of "energy independence" was on the horizon? Gas is half what it was then, but not for long. When OPEC's planned production cuts hit, tightening the global supply of oil just when economies are poised to resume growth, the world may well face the worst oil crunch in history.

The way to avert the brunt of that? It might not be pretty at first, but a price floor – a government-mandated minimum – on retail gas will buy us the time we need to wean us off the oil.

Two reports out today on conflict and the environment mesh in a disturbing way. One, from the United Nations Environment Program, asserts that persistent conflicts within states most often relapse when the root cause is scarce natural resources and environmental issues are not incorporated into efforts to forge peace. The other study, “Warfare in Biodiversity Hotspots,” has been published in the journal Conservation Biology. The authors find that “more than 80 percent of the world’s major armed conflicts from 1950 to 2000 occurred in regions identified as the most biologically diverse and threatened places on Earth.” More on conflict and ecology from Conservation International.

So there’s potentially a vicious loop here, as resource-based battles drag on in the world’s last bastions of biological bounty.

IVINDO NATIONAL PARK, Gabon — The forest here seems to go on forever, interrupted only by the broad ribbons of its rivers. Deep inside, some of the world’s rarest creatures cavort in one of the most pristine patches of rain forest on earth, a direct but accidental result of Gabon’s reliance on one of the filthiest fossil fuels: crude oil.

For years, these vast stretches of green have been left almost entirely untouched because oil has supplied Gabon’s people with one of the highest per capita incomes in sub-Saharan Africa.

But now the oil is running out, and Gabon needs a new source of cash, quickly, throwing the future of Gabon’s lush, Edenic landscapes into doubt.

BUENOS AIRES — Cows are dying by the thousands in the baking sun, and crops are being lost before their seeds even break the soil.

Argentina’s worst drought in more than 50 years is magnifying the country’s chances of suffering another economic crisis, and the lost farming revenue will complicate the government’s efforts to meet more than $18 billion in debt obligations this year, economists said.

Biotechnology companies are keeping university scientists from fully researching the effectiveness and environmental impact of the industry’s genetically modified crops, according to an unusual complaint issued by a group of those scientists.

As hard as it is to create cranes that will survive in the wild, making sure there is suitable wilderness to put them in may be harder. Globally, loss of habitat is the grimmest threat to endangered species, and it is no longer enough to simply seal off the habitat that’s left. Those ecosystems also must be managed as assiduously as the animals themselves.

Having disrupted natural fire cycles, we’re forced to suppress fires in some areas and set them in others. We control predators, mop up pollution or clear out invasive species. We slip contraceptives to overpopulations of deer and the plague vaccine to ferrets; call in sharpshooters in helicopters to assassinate every last feral pig from certain islands; teach California condors not to perch on power lines; pick up migrating salamanders and carry them safely across a California road; and install feeders to satiate the Devil’s Hole pupfish, a species of small blue fish that lives exclusively in a particular pool of warm water in the Nevada desert. “If humans had the inclination to give up, this would be the one species given up on,” Kierán Suckling, executive director of the Center for Biological Diversity, says of the pupfish. “You could say it wouldn’t matter — it has very few ecological interactions with anything else in the world. But just the opposite has happened. I think we’ve got a very unshakable ethic to prevent extinction in this country.

The head of Iran's state oil firm expressed hope that crude prices would rise, citing predictions of increased consumption in coming months, the official IRNA news agency reported on Sunday.

Seifollah Jashnsaz, managing director of the National Iranian Oil Company, also said Iran had cut output by 550,000 barrels per day (bpd), in line with the drive by the Organization of the Petroleum Exporting Countries (OPEC) in recent months to reduce production in a bid to halt tumbling prices.

GALVESTON, Texas -- An oil tanker remained grounded late Saturday night off the Texas coast in the Gulf of Mexico, but no fuel had spilled from it, officials said.

The U.S. Coast Guard, other federal and state agencies and a salvage company have been planning a strategy for freeing the 800-foot vessel, the Yasa Golden Dardanelles. It's carrying 620,000 barrels of low sulfur fuel oil, said Coast Guard spokeswoman Renee Aiello.

MOSCOW — Russia last week marked the 20th anniversary of the Soviet withdrawal from Afghanistan with avowals from its leaders that they really, truly do not want the American military mission there to suffer the same humiliating fate.

In practice, though, it often seems that Russia cannot decide whether it hopes that America’s current venture in Afghanistan succeeds, collapses or just ends up in a lengthy slog that might be cause for furtive grins in the backrooms of the Kremlin.

Last year, when the price of crude oil topped $147 a barrel, a number of large companies in Europe and the United States were spurred to set up plants to collect and refine used cooking oil into biodiesel.

The global recession and the steep drop in oil prices have now killed many of those large refining ventures. But smaller, simpler ones like Mr. Friedlos’s are moving in to fill the void with their direct-to-tank product, having been deluged by offers of free oil from restaurants.

The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japan’s economy.

Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990.

The Takigasaki family in the Tokyo suburb of Nakano goes further to save a yen or two. Although the family has a comfortable nest egg, Hiroko Takigasaki carefully rations her vegetables. When she goes through too many in a given week, she reverts to her cost-saving standby: cabbage stew.

I recognize that this meltdown is going to be terrible and painful for many millions of people. I've been a foreign reporter long enough to know that the end of this mad buying spree will likely trigger unrest and conflict in the many developing countries that produced all those great cheap, stylish goods, as well as at home, where all of us - including me - bought them. But in the end, it all seems like a necessary corrective.

“You’re comparing apples to oranges,” says John Zych, DBA, associate professor of marketing management at the University of Scranton. He says you can’t compare automotive sales month to month to spot trends. Instead, year-over-year provides a better picture. That bigger picture shows SUV sales are still down. Moreover, he says, SUV-buyers generally fall into one of two categories.

“There are people who need these vehicles for towing, or large families, or for driving in the hinterlands,” he says. “There is a complex set of objectives that go into car-buying. For these people, even when gas goes up, this vehicle has utility and they’ll continue to buy it. The other group is the trendy group. That group, I think, has gone away.”

MENDOTA, Calif. — The country’s biggest agricultural engine, California’s sprawling Central Valley, is being battered by the recession like farmland most everywhere. But in an unlucky strike of nature, the downturn is being deepened by a severe drought that threatens to drive up joblessness, increase food prices and cripple farms and towns.

“We are faced with two problems,” Vanderhyde said Wednesday. “The input prices have increased in price the last two years — the feed, fuel and fertilizer — and second is what has happened to export prices.”

The export markets are in a serious decline, and the droughts are over in Australia and New Zealand, leading to more milk production, Tony Banks, assistant director of commodity marketing for the Virginia Farm Bureau Federation, said .

“The market decline is being driven by the global economy,” he said Thursday. “The milk consumption, especially with cheese, a popular ingredient within the restaurant trade, has declined because people are not eating out as much."

Yoga Yogendran of the National Research Council's Institute for Fuel Cell Innovation says the cluster of Vancouver-area companies have been conducting cutting edge research into hydrogen fuel cells for years, a technology he says may significantly lower greenhouse gases around the world -- and help fuel everything from electric power plants to cars to portable music devices.

"This is not the silver bullet," he told CTV.ca from Vancouver. "But it is a key solution to help us be more responsible for global warming and climate change or at least meet our (international) obligations."

Middle East oil companies are spending billions of dollars on security every year, and the cost is rising fast, according to a new report by The Gulf, a weekly business magazine.

Saudi Arabia alone is expected to spend $14 billion over the next six years to improve oil security, while other energy producers are investing heavily in protecting pipelines, refineries, rigs, tankers and other assets, The Gulf said in its latest issue.

ABU DHABI (Reuters) - Regional tensions are fuelling continued military spending by Gulf Arab states despite the global downturn and low oil prices, major arms suppliers said on Sunday.

'The Middle East market, including the Gulf, remains very viable and credible. There is confidence in their ability to drive on their acquisition schemes,' said P.T. Mikolash, Raytheon Co.'s Middle East and North Africa chief.

'There are no delays in our projects so far,' he said on the sidelines of the International Defence Exhibition (IDEX) in Abu Dhabi, the Middle East's largest military show.

Kuwait, the world's seventh-largest oil exporter, suspended its more than 2 million barrels per day (bpd) of oil shipments early on Sunday, said a spokesman for state refiner Kuwait National Petroleum Co (KNPC).

"Oil exports were stopped on Sunday morning due to low visibility and will resume once weather conditions are better," Ahmad al-Muzaiel told Reuters. High winds are whipping up sand and reducing visibility. Visibility was expected to improve by Sunday evening, state news agency KUNA cited a weather expert as saying.

Bad weather extended through the northern Gulf. Exports from Iran's main crude oil terminal Kharg Island have been intermittent since last Wednesday due to high winds.

TEHRAN (Dow Jones) - Iran's governor to the Organization of Petroleum Exporting Countries said Sunday excess oil supplies have allowed crude stockpiles in consuming countries to rise and should be taken out of the market.

"Generally, OPEC believes additional barrels (of crude) should be out of the market. This is very important not only for OPEC but for all producers - to remove all additional barrels from the market," Mohammad Ali Khatibi told Dow Jones Newswires by phone Sunday.

Valero Energy Corp. says it is shutting down its entire Texas City refinery, rather than keep parts of it open while some units undergo maintenance, because refining margins are weak and demand for gasoline is down.

Remember when Intel, Microsoft, Dell, Lucent, Yahoo and Cisco ruled the markets? There was an era, roughly 1997 to 2000 when those stocks actually mattered. They were important companies doing big things in terms of providing the technology needed for the next century’s communications and internet build-out. And then, they just didn’t matter anymore. Once the dot com bubble burst, every bounce or rally in these names was basically a selling opportunity…for 8 years and counting!

...I believe that this story is repeating itself in the oil patch. Market participants seem to be in a state of disbelief that Chesapeake, Transocean, National Oilwell Varco and ConocoPhillips aren’t important anymore. These stocks may have have seen the best levels they will ever see, at least for a long time.

RIYADH (Reuters) - Saudi Arabia is the world's top oil exporter and cradle of Islam, but does not always punch its weight in the Middle East, where Islamist groups like Hamas and Hezbollah enjoy more popular appeal than any Arab government.

Any Saudi aspirations to exert decisive leadership in a fractured Arab world, or even to match the influence of non-Arab powers like Iran, Turkey and Israel, for now remain just that.

Manama: Yemen and Tunisia yesterday expressed their solidarity with Bahrain over Iran's claims of sovereignty over the kingdom even as Iran's Deputy Oil Minister Syed Reza Kassai said his country had not received any official statement on halting talks over gas imports.

It's about time that the Gulf's largest economy - buttressed by a local banking system that has so far proved largely immune to the effects of the global crisis, and enormous cash surpluses accrued over the era of peak oil - addressed the needs of its middle and lower classes.

Prices for raw materials have all but killed commercial applications for the time being and the oil market, which was making corn-based ethanol look economically viable, is leveling out, going from $147 per barrel in July to less than $40 today.

Private investors have gone cold and federal lawmakers –- who now realize their production mandates of 100 million gallons of advanced biofuels in 2010 and 250 million gallons in 2011 won’t be reached on time -– are more hesitant than ever.

ALBANY — The state's largest unpaid oil spill bill is tied up in a dispute with the world's largest oil company.

Since 2006, the state spill fund has spent more than $9 million at Lighthouse Point on the St. Lawrence river waterfront in Ogdensburg, where a petroleum terminal owned by Exxon Mobil and its corporate ancestors operated for about a century before closing in 1984.

BEIJING — Secretary of State Hillary Clinton set a new tone Saturday for U.S. relations with China , saying the two nations would join a common battle against global warming even as they look for ways to pull the world out of economic turmoil and recession.

Clinton cited the "tremendous opportunity" before Washington and Beijing as they unite on "one of the most important issues that has ever, ever faced humanity." But Clinton skated over the more contentious issue of China's human rights record.

A report by the UK's Institution of Mechanical Engineers will next month call for governments to accept that climate change is now inevitable. Strategies must be put in place now to protect our infrastructure from its worst effects, alongside existing efforts to reduce emissions, it will argue.

CAPE TOWN, South Africa — If we don't deal with climate change decisively, "what we're talking about then is extended world war," the eminent economist said.

His small, elite audience Saturday had been stranded here by bad weather and was talking climate. They couldn't do much about the weather, but the climate was squarely in their hands. And so, Lord Nicholas Stern was telling them, was the potential for mass migrations setting off mass conflict.

"Somehow we have to explain to people just how worrying that is," the British economic thinker said.

How very ironic, then, that 2007, the Year of the Pig by the Chinese Zodiac, is considered a lucky year. It saw couples all over Korea, and probably anywhere else the Chinese years are celebrated, doing their darnedest to conceive and bear their child in '07. We did, but by "lucky" accident rather than proper planning.

Perhaps my son's generation will be similar to mine in that I was born in the last year of the Baby Boom while he was born in the last year BTSHTF: Before the Sh!+ hit the fan.

If you were born after 1960, you will probably die of violence, starvation or contagious disease. - Jay Hanson Thermo/Gene Collision 2/20/2007

Generation F includes everyone under 50. The people born now will at least have the advantage of not being handicapped by any memories of peace and plenty. They will be the true natives of the post peak world.

People born 2009 will be aged 21 in 2030, when Hanson reckons the dieoff will be well underway. Being young and mentally tough, they will be the executioners of many of their elders.

BEIJING - U.S. Secretary of State Hillary Rodham Clinton urged China on Sunday to continue investing in United States Treasury bonds and says that country's continued investment in the U.S. is a recognition that the two countries depend on each other.

And I'm guessing human rights aren't going to be improving in China anyway, no matter what we say about it.

What Beijing apparently fears is that the anger will manifest somehow into a political force. Sun Chunlan, vice-chairman of the government-backed All-China Federation of Trade Unions, claimed this week that police task forces had been "rushed" to China's regions to ensure stability. "Hostile forces within and outside China [are] using the difficulties of some enterprises to infiltrate and bring trouble to rural migrant workers," he charged.

...Ironically, one reason why the predicted unrest hasn't materialized so far is the same Chinese trait often cursed in the West as a key factor in the recent global collapse — this country's propensity to save the money they earn rather than spend it. China's savings rate last year was a whopping 50 per cent, compared with about 3 per cent in the United States.

Ultimately, nothing will ever be done about human "rights" because they don't exist. What we have are privileges which must be worked for and fought for. No effort, no fighting, then no privileges.

As long as you call it a "right" it gives the oppressed the illusory hope that their lots will improve without any direct action, ability, or agency. Calling it a "right" also gives us the illusion of those in power doing something about "guaranteeing" those "rights".

The idea of a "right" keeps it all in the same relative places as they have been for thousands of years - all f-ed up.

If we all realized that we have no rights, then we could all at least attempt to acquire the privileges we require.

According to Rousseau, by joining together through the social contract and abandoning their claims of natural right, individuals can both preserve themselves and remain free. This is because submission to the authority of the general will of the people as a whole guarantees individuals against being subordinated to the wills of others and also ensures that they obey themselves because they are, collectively, the authors of the law.

Looks to me like the current meltdown of world economies has put 300 years (more, really -- just counting from Rousseau) of speculation to rest. There are no "natural" rights other than the "right" made by "might".

The "social contract" seems to be a function of population density and available resources. When resources are plentiful and population thin, there is no need for a contract. When resources are scarce and the population is dense, then the contract is rendered null. There is some intermediate state -- in which most of us in the U.S. lived for the last 70 years or so-- where the illusion of a valid social contract allows us happy access to Fantasyland.

Yep the Internet is great, but remember, while it was set up to be very decentralized, nowadays a few hands on a few crucial switches and POOF there it goes.

Buy books, buy books, buy books. Did I mention, buy books?

And learn to see Internet entities as the insubstantial wraiths they are, and get to know people locally, in-person. Spend lots of face to face time. Know their mailing addresses and write letters, Use the tellyophone while we still have them, You can know a bunch of people on the 'net then something goes "clunk" and all of a sudden, you don't have each other's actual working email addresses, mailing addresses, don't know each other's real names etc and well, they might as well have died.

So enjoy Wikipedia and archive dot org and the gutenberg project, but remember someone somewhere can snap their fingers, it all goes poof, and if you don't have Rousseau on your shelf, you'd better have a good memory.

Yes, I got back to the bay area ... been a hard 6 months, but somehow I've managed to always sleep under a roof, a major triumph. I've had to panhandle for a period of about 4 months, the last couple of months have not had to, I was chronicling my daily life on Matt Savinar's site but I ran afoul of some of the Republicans there and have been banned.

I'm sure it's only a matter of time before I"m banned here too, frankly. I'm able to fake being solidly in the middle-class with family to bounce back to, and a PayPal account for cyber-begging so I can buy land, a truck, and tuck a lot away into savings.

But right now, I'm on some land in a very dilapidated old trailer, added some corrugated steel to the roof so it's not leaking now, put in a sort of simple drainage system and solid stuff is dealt with as Humanure, I'm expected to help out around here and do some chores, and I think somehow on the underground economy I can get the bux together to do a bankruptcy so I can work "on the books", and get one of those elite minimum-wage jobs. I've already sniffing around, places are waiting to see what the economy does.

Having been self-employed for years and before that an employee, I have a fair amount of distrust of employers and the "job market" in general so I am hoping to get something going on my own, or several things. Some people on that other forum helped me out, for which I'm very thankful, and I'm sure for which they're being threatened with being banned also, or are banned by now too. I dare not identify the doomer I'm staying on the land of, since I'm sure they'll be out to get him too, sadly. No act of kindness however random, goes unpunished in the Empire!

It looks like I have a setup where I can live on much less money than the average slave, and this is good. I'll be learning to garden hands-on. It's the rainy cold season right now, and I sure plan to be able to just hole up without expectations of much travel or work *next* winter, because the winter can be brutal even in the Bay Area if you're poor.

I have procured a musical saw after trying the technique out with an el cheapo saw, which I've been sawing a ton of wood with lately. The musical saw should beat hell out of asking for spare change, once the weather warms up and people are out and about in places like "Egg Park" in palo alto, the various farmer's markets, Santa Cruz, etc. Caricature drawing has not worked out so well, I expected to do great, but it's awful out here - people are not really sure what it is, and keep expecting there to be a little camera somewhere, and a place where a computer spits out a drawing. Ugh. Places that get tourists from overseas and the Midwest, like Fisherman's Wharf and Santa Cruz, may be better. The musical saw is more likely to do well, since musicians have ACLU protection that artists do not, as long as they don't use amplifiers. And no one plays the saw, I think for most people it's too danged hard. There's a Musical Saw Festival in August out here, but until then I don't hope to run into a fellow saw player - that's OK though, there's Youtube!

I still have the motorcycle, keeping it gassed and insured is about the outer limit of my finances but it's my primary escape vehicle if I have to pick up and go. I've been told it's OK for me to stay here for years if I like, and start living normally, get a job or work an enterprise or whatever, and I hope this is so! The constant moving, being on the move, not daring to own any more than I can carry on my back, gets old. The musical saw is about the biggest instrument I dare carry, and it's damned hard to damage one. I'm hoping that odd jobs, playing the saw, going around cleaning windows, making some craft (if anyone buys crafty crap any more) doing whatever works to bring in a trickle of cash, and then gardening and gathering for food, will enable me to "live like the future, today!"

There is no community on the Internet, it's only community when you MEET people and spend real time with them. You have to spend actual, human, face to face time.

Right now there are several people on the other site that I'd like to send emails and keep in contact with, but I can't since we never exchanged emails. I can't find 'em online, I don't know real names or addresses, arrgh! I owe one of them a resume' since they think they can get me some writing gigs, but I have no way to contact them, or them to contact me. They might as well have died.

PEOPLE ON THE INTERNET ARE NOT REAL - YOU MAY, MAYBE, GET TO MAKE SOME OF THE LOCAL ONES REAL BY MEETING THEM.

So, meet up! Get to know local Peak Oilers. Meet at a bar and call out "Peak Oil!" when your glass goes down to half full. Meet up at the local Senior Center and do quilts while you talk. Meet up and go fishing! Meet up at the park, bring the kids, and watch 'em play no-score soccer! You have to actually meet up! Real life is real, the Internet is not. Soomer or later, "The Machine Stops" as the story from the early 1900s was titled.

The nature of the Internet is dividing and pernicious. I have ANOTHER resume to write, thank goodness for someone I talk to face to face, when I run into him. He gave me his email, no good of course! And he's not emailed me, although I gave him the correct address, he's probably got one letter wrong and that killed any type of communication other than face to face. So, I will have to put in some time loitering where he loiters, and we'll meet again. I'll get his snail-mail address and all will be done by US mail. And ultimately, if he gets me work, what will DO it, will be the face to face stuff.

So use the internet, but don't trust the thing. It's a consensual illusion, and not even a very good one at that. Buy books. Go to meetings. Speak out and learn some good jokes. Meet a possible nascent Doomer and buy 'em a beer. Do all you can to build up REAL links with REAL people.

Well, I'm finding that communication is basically ..... impossible. There seems to be very little "splash" between this site and that, and I'd need some way to communicate in private, since I don't want anyone over there to get banned because they are my friend, or simply don't agree with the right-wing types.

If only I'd been a lot more paranoid, and made sure to send friends there my email address, and told them to be sure to SAVE it and KEEP IT SECRET and TRUST NO ONE.

But this all points out, and I"m sure many here have similar stories, about how the virtual community is just that, "virtual" not real.

That's OK if you have no interest in issues of right & wrong, good & evil, etc. When the rest of us refer to 'rights', we mean that we are entitled to do pretty much anything necessary to preserve them. If they're just privileges, the issue is much less clear.

If you read my comment carefully, you can see that's exactly my stance: I have absolutely no interest in issues of right and wrong and good and evil. Cannibalism, annointing of the sick, baby-raping, procreation, genocide, welfare, assassination, peace, love, happiness, torture, it's all the same to me.

/sarcanol

They are just privileges. You don't have any "rights", and neither do I. Claims to "rights" have never stopped torture, murder, rape, abuse, or oppression of any kind. The idea of the "right" is that it is somehow already guaranteed or god-given. It isn't, which is why it CAN be violated by just about anyone or anything.

Just like a privilege.

How many of the privileges you currently enjoy are absolutely undefended, precisely because you think of them as inalienable rights?

I think what is meant by a 'right' is that it is something you claim as your just, fair and reasonable entitlement.

Like the right to speak freely without restriction. Claiming and excercising this right does not mean that it is impossible for someone to infringe on your right to speak freely. Just that if someone violates your rights, then they are in the wrong and it is appropriate and justified to stop that person from doing whatever it is that they are doing which violates your right.

A privilege would be something which actually belongs rightfully to another person. But by their good graces and concent they have given you the privilege to do something which would not otherwise be your right. Like if the owner of a house granted you the privilege to live in their house. If that person chose to not let you use their house you would have no moral justification for compelling them to do so.

Like if a burglar broke into your home it would be your right to shoot them, it would not be a privilege for which you need another person's permission in order to morally do. Also, just because it is your right to do so does not mean in any way that it is guaranteed to happen. Most if not all of our rights require us or someone else to enforce them, they aren't like laws of nature like gravity.

No, I was trying to explain to you what morals are which is what the concept of rights derives from. An adult has the 'ability' to throw a baby off a roof, but they never have a moral 'right' to. Just because the baby has no way of stopping itself from being thrown off the roof doesn't mean that she has no right to not have that happen to her.

Just because a person has a morally correct right to be treated a certain way doesn't mean that that right will not be disrespected and violated. The fact that the possibility exists that a bad thing can happen to a person does not rule out the concept that they have a moral, legal and justified right for that not to happen to them.

Innocent people have been sentenced, tortured and executed by people with the "right".
Ask the children being thrown into a gas chamber at Auschwitz what are rights and morals.
What about a prisoner in a gulag in Siberia.

People on a plane getting flown into a building.
Every continent has experienced the slaughter of their native peoples.
Over the last twenty or thirty years there has been mass slaughter by soldiers and civilians "with the right", their morals must have allowed them to have the "right".

I could go on about wars from the ancient past to the present or everyday murder from the dawn of time. I could talk about sending children into coal mines or the use of humans and animals in medical experiments.

The point is morals and rights are a product of the time and of the people with the power to enforce their own sets of values. Rights, morals and values change with circumstances, beliefs and faith.

YOUR morals and values would change dramatically if you and your family were starving and others nearby were not. When you and yours have full bellies and the freedom to seek education and travel, that seems to be the time to enforce morals and values, simply because it protects you from others coveting that which you have, it's simply self preservation.

Wife beating, torture, child labor, slavery were all morally acceptable at some point in history. Amazingly in Britain in the nineteenth century it was a capital offense to attempt suicide. At least one person was hanged for the crime.

I expect morals, rights and values to undergo a little change as life gets harder.

You're correct. What people consider to be their rights are constantly changing. And it has been the very common for legitimate rights claimed by people to be trampled upon, particularly by people acting under the guise of government.

The only way that China can continue to accumulate U.S. treasuries is if Americans continue to buy Chinese goods and China continues to run a trade surplus with the U.S.

Is this what Clinton is arguing for? We're the customers (consumers) and China gives us vendor financing?

Concerning the U.S. treasuries China already has accumulated, China could at any time decide to dump these. This could prove devastating to both the Chinese and U.S. economies. So from this point of view the two countries do "depend on each other."

This is a subtle distinction, but one Clinton doesn't make sufficiently clear.

China could at any time decide to dump these. This could prove devastating to both the Chinese and U.S.

I think China is already mitigating this risk. There have been a number of reports of major Chinese investments in Brazilian and Russian FF production; there have also been reports of China seeking to purchase growing rights on other nations agricultural lands.

Reporting on this has been spotty but my hunch is that China is getting rid of its horde of dollars while the getting is good and is converting fiat currency into critical assets: food and FF.

The NY Times story above indicated Mendosa, CA has a 35% unemployment rate. It is in the Central Valley, previously one of the most productive agricultural areas in the world. Had read elsewhere to expect the price of vegetables to rise.

...I believe that this story is repeating itself in the oil patch. Market participants seem to be in a state of disbelief that Chesapeake, Transocean, National Oilwell Varco and ConocoPhillips aren’t important anymore. These stocks may have have seen the best levels they will ever see, at least for a long time.

I happen to agree with this. Though SOME names will do well -those that own low priced reserves and make smart managerial moves will sharply outperform the market (so they one day get the honor of becoming part of the DOE). But most North American oil and gas (especially gas) names will go the way of the dodo. These fall in two camps: 1)those older companies who still own decent producing wells, but whose marginal resource is much more costly to develop than society can afford - these will be subsumed over time by the majors and 2)those newer companies in oil, gas, biofuels, etc that have low EROI technology/sources that will never get off the ground due to inability of their prospects to obtain capital, etc.

Even (and especially with) reduced demand, the US will become more energy dependent with each passing year, at least with respect to liquid fuels on the present course. The 'cheap' stuff is elsewhere, (and there isn't much of that either).

I think that most of us would agree that the "winners" in the current environment are those who lose the least. In any case, it's instructive to compare the longer term stock price of oil companies like ConocoPhillips to the auto, housing and financial sectors. Here is the Conoco stock chart:

an interesting analysis would be to look at oil and gas stocks since the near quadrupling of oil and gas prices in last decade compared to entire E&P/E&C/Service stock prices over same timeframe. Methinks it would be quite enlightening.

In any event, going forward, my guesstimate is that the 2012 combined net oil exports from Canada, Venezuela and Mexico will be down to about 2.7 mbpd or so (assuming about a 200,000 bpd increase from Canada)--versus 2004 combined net oil exports of 5.0 mbpd (EIA)--and by the end of 2012, our middle case estimate is that the top five net oil exporters will have already shipped about half of their post-2005 cumulative net oil exports.

I am seriously considering going to my bosses' boss next week to say that if headcount needs to be cut, he should approach my group about cutting our salary 25% first. I know you did this, WT, in the 80's and it worked, correct? You kept your job?

I was in charge of oil exploration in a small firm that also provided services to the oil industry in the late Eighties (I had nothing to do with the service side), and I was the most highly paid employee. Looking at how slow business was, I knew that layoffs were coming. So, I proposed a 50% salary cut (which would make me the lowest paid employee), in exchange for an equity interest in oil and gas deals that I generated. The owner of the company accepted my proposal (my wife thought I was nuts), and as I expected half of the employees lost their jobs. Within two years, the annual salary that I gave up was offset by about two weeks of cash flow from my interest in a field I found.

In regard to going over the head of your boss, I would think long and hard about it. The risk is that you would be a prime candidate for being laid off, unless you think that your direct supervisor is toast.

If your direct supervisor is not going to be let go, you might have a confidential discussion with your boss, telling him that you would support a move to cut salaries, rather than implement across the board layoffs, if the company can't support the current payroll. I think that the key here is to maintain good relations with your boss, and imply that he would be doing the humane thing--trying to maintain health care and a basic salary for employees rather than eliminating their jobs. In any case, proceed with care. You are about to walk across a minefield.

One way to split the difference would be to put a salary reduction proposal together, run it past your boss and ask his consent for you to present it to his boss.

Thanks for the advice, WT. I know and am more friendly with my bosses' boss, but you're right, probably best not to burn the bridge to my current boss. I've been discussing this topic with a couple of coworkers recently, so it may be best to not pitch the proposal alone. I'll let you all know how it goes.

"Within two years, the annual salary that I gave up was offset by about two weeks of cash flow from my interest in a field I found."

Mineral rights are probably the best dividend-paying investments in the world. I was lucky enough to get some back in 2002 but nowadays no one in their right mind will sell them. Why would they? Just sit back and collect the royalties, and let the field operator do the work.

Unfortunately, like gold bullion, the best time to buy mineral rights was five years ago.

And the money being pulled out of BoA and Citi must
be approaching catastrophic levels now:

The government cannot let these shares fall much further, since a bank run becomes more imminent with every penny lost. We already have the insane situation that Citi has received some $50 billion in public funds, but has a market cap of only slightly above $10 billion. It should be obvious by now that the issue should have been dealt with much sooner, and in a totally different fashion.

-Ilargi

Read this article per Bloomberg:

The Title:

U.S. Lawmakers Clash Over Nationalizing Banks to Stem Declines

was:

Dodd, Frank Clash Over Need for Obama Administration to Take Over Banks

now:

hard to even find.

Committee Chairman Barney Frank said nationalization ought “to be avoided.” (That's the only sentence
in any version of the article related to Frank)

It looks like the drumbeat for the nationalization of the insolvent banks, something that began on the blogs, is beginning to gain momentum in the mainstream press:

On Friday, President Obama’s spokesman tried to calm the markets by reaffirming the administration’s preference for a sound privately owned banking system. We share that preference. But it looks as if the best way to get from here to there is for some of the banks to spend some time in the government’s hands.

Even though it appears Obama, Geithner and Summers may get forced screaming and kicking into doing the right thing, the detail to watch is what happens to the bond holders. The stockholders may get wiped out, but if the bond holders don’t also take a haircut, via conversion of the bank bonds to equity, then the fix was in, and the American taxpayers are robbed of money they shouldn’t have been.

And if the same people who brought us to
this catastrophe party are still in charge
after "nationalization" (and what's this "stress test" again?) and there's still "value",

instead of doing perp walks,

we've been conned.

"The ultimate cause of the "blow-off top" in housing prices was excessive leverage. So was the underlying cause of the business failures in the banking and finance system.

Every single one of the firms that has failed - Fannie, Freddie, AIG, Lehman and Bear Stearns - was operating with more than double the previously-lawful limit of 14:1 leverage at the time of their collapse.

All of them.

That limit was removed due to explicit lobbying by Henry Paulson (then in charge of Goldman Sachs) in front of Congress and the SEC in 2004 - after being rejected on the very same request in 2000.

The fact of the matter, Mr. Gramm, is that absent excessive leverage credit bubbles cannot grow to a dangerous size. Leverage limits prohibit that growth by constraining the ability to grow a balance sheet beyond what tangible capital will reasonably support. The housing bubble, LBO bubble, commercial real-estate bubble and consumer credit bubble had all reached their limit under the previous leverage ratio caps around the 2004 time frame, and so the banking industry went to Congress and the SEC and asked for it to be removed, claiming that they were "better able to manage risk."

Do you believe this outcome was "unforseeable?" Or is this really just a giant siphon, deliberately sucking all the assets of the world economy into the hands of a very small elite group?

Why is no one in the government even mentioning the contents of the vaults full of "toxic" assets. Why does the general population continue to allow the Emperor to pretend he is clothed? Where are the pitchforks and torches? Where the marches on Washington? Are we numb, scared, indifferent, depressed, despondent, just hoping someone else will be worse off if we hide and watch? What maintains this global apathy? It's like the whole human race has run out of steam!

Doesn't anyone here think that the "miracle on the Hudson",
"the 8 baby invitro'd mommy on welfare" have been
run just a few too many times on tv?

And now Chandra Levy getting another lease on life?

While we know more about Netanyahu than our own
SCOTUS lady with pancreatic cancer, just to cite
an off the top ex?

And every bit of growth promoted by Bush43
has been simply debt expanded.

"We have lots of treason in DC and people seem to have forgotten, what is right and what is wrong. Both parties are continuing the wars (invasions) in Central Asia. Both parties want eternal war with Muslims. Both parties want ‘free trade’ even though this is destroying our nation. Both parties are treasonous. This lack of choice is painful to see. I want a third party that is a Patriot Party and it can’t be a right wing racist party since many European ethnic groups are just as prone to treason as any other groups."-E Supkis

Nationalization w/o mark to market pricing
of Toxic(fraud) assets( horse race tickets, out of the
money) is impossible.

When the values come down further so will tax revenues, pensions values (further), and on and on. We all get to take the medicine. But the Asian (and others) lenders aren't going to back Fannie and Freddie or the Treasury to maintain the bubble anyway.

Greg Mankiw in Favor of Nationalization (and Tries to Clean Up Nomenclature)

The problem is that the procedures that work for small and even fairly large banks do not work for super big banks (so who would buy Citi's deposits and branches, pray tell? And even if such a bank existed, do we want that much concentration? And what do we do with the junky assets, the private equity portfolio, the asset management business, its credit default swaps book, its various trading operations (many, ranging from FX, Treasuries, structured credits, money markets instruments, equities, junk bonds, derivatives, and I'm sure I've missed quite a few). These banks are not simply bigger; they are in a far wider range of businesses than the typical FDIC basket case, with a much larger geographical footprint (typically substantial foreign operations) and more complicated operations (meaning management information systems, financial reporting, transaction processing, customer reporting, risk controls).

I think that's right. That was the import of Yves' post, and why an all out effort needs to be made to clear the air as to what is meant when we say "nationalization."

Because of their interconnectedness and the social functions they serve, these big banks just can't declare bankrupcy like some other businesses would when they become insolvent. As Yves points out, that would be too disruptive, creating havock on their trading desks and other operations as well as caos amongst depositors. That's why the government has to step into the breach, with the powers that inhere only to governments, to insure not only continuity of operations, but an orderly transfer of the bank to its creditors, to its bond holders:

If the government is to intervene in a big way to fix the banking system, "nationalization" is the wrong word because it suggests the wrong endgame. If banks are as insolvent as some analysts claim, then the goal should be a massive reorganization of these financial institutions. Some might call it nationalization, but more accurately it would be a type of bankruptcy procedure.

Bankruptcy could become, in effect, a massive bank recapitalization. Essentially, the equity holders are told, "Go away, you have been zeroed out." The debt holders are told, "Congratulations, you are the new equity holders." Suddenly, these financial organizations have a lot more equity capital and not a shred of debt! And all done without a penny of taxpayer money!

Here is an interesting question. Assuming that it is when, not if, that the FDIC has trouble paying off all depositers, up to the insured limits, would you be better off staying at a very large bank, or going to a small one? Or to put it this way, is the FDIC more likely to drag its feet with a small bank than a large bank? Also, is it more likely that the FDIC will keep a large bank going as a functioning entity, versus closing a smaller one?

I don't think there's any doubt that the government moves at lightening speed to close smaller banks when they become insolvent. It has already taken over several banks this year. I think it's Naked Capitalism that keeps a running score, along with pertinent details.

As Yves explains:

No one seems to have a problem with the FDIC shuttering bank, selling deposits and assets, and figuring out what to do what's left over. Folks, that is a form of nationalization. What most people fail to recognize is that the FDIC tries to minimize how long it is in control...

The problem is that the procedures that work for small and even fairly large banks do not work for super big banks...

And I don't even want to imagine what the consequences would be if the FDIC didn't pay off all insured depositers. That's called sovereign default, and if it comes to that I think we've got much bigger problems than the banks going broke.

Why should banks ever be allowed to be "too big"? Isn't that what the anti-trust laws of yore intended to prevent -- effective monopolies?

If they don't need to be large, then they have to be kept small enough to fail without systemic risk. And in this case, they will fail anyway, even if they "can't be allowed to". It's just how they fail that'll be interesting to watch.

If depositor banks and investment banks were separate, it would be a lot easier to let big investment banks fail while insuring depositors.

Unfortunately, as Naked Capitalism pointed out, there are telltale signes that Volcker has been marginalized in the Obama administration:

Paul Volcker has grown increasingly frustrated over delays in setting up the economic advisory group President Barack Obama picked the former Federal Reserve chairman to lead...

Volcker, 81, blames Obama’s National Economic Council Director Lawrence Summers for slowing down the effort to organize the panel of outside advisers....Summers isn’t regularly inviting Volcker to White House meetings and hasn’t shown interest in collaborating on policy or sharing potential solutions to the economic crisis,

The usual denials ensued. But a story that corroborates this picture comes from the Globe and Mail... Volcker is very much in favor where bank do the bulk of credit intermediation and focus on traditional lending. Effectively, he is calling for the re-imposition of Glass Steagall, the Depression-era legislation that separated commercial banking from investment banking. As we discuss below, this is a radical idea and is at odds with the program Geithner announced earlier this week:

Barter goods are a good idea. Money can get weird, how do you convince 'em your silver coins are worth more than "sandwich" coins? And of what use is money at all if things shut down as much as we think it will?

There is only so much money, I mean so-called "real" or uninflated money to go around.

The FDIC limits are comforting when things are stable, and are almost irrelevant when things are good, but when things start to go south, I see a curious paradox, or as is widely stated, a tipping point..

IIRC, the present FDIC protection is $250K per account. If I was a rich and liquid SOB, (a very big if), I would make sure none of my accounts exceeded the limit. If I was prudent, I would split my holdings between two accounts.

If I was super prudent, I would split my lucre between different banks and different accounts, staying well under the stated limit because it costs me little or nothing, and I don't trust the banksters of whom were born without the benefit of wedlock.

Apart from the very rich or the very stupid rich (or just the very stupid) the outcome would be that close to 100% of the bank's true holdings would be borne by the FDIC, in the event of bank failure. Any leverage losses would be borne by the diaspora of investors.

IOW, increasing insurance limits reduces the confidence in the banks, rather than encouraging the depositors, and investors to stay put, unless of course, one assumes the gummint has infinite resources. This control does not preclude a bank run, it just establishes a potential bank run with a floor, and does nothing to protect any investors.

What the government has is infinite fiat money. Resources are quite a different thing.

My point is that as things slide, government policy ensures maximum exposure to the government, when the government is least capable to absorb the loss. Depositors and true investors will flee, leaving only speculators who are highly leveraged using someone else's money.

I think everyone should be prepared to include BOA and CITI in their portfolio even if they have never invested in the stock market in their life, because that is where some of their tax dollars are going.

Oh, I mentioned the IMF earlier. Well, as various states fail, less are able to ante up.

I am reminded of the lyrics of "Who will buy?", from the play Oliver:

Me, oh my!
I don't want to lose it
So what am I to do
To keep the sky so blue?
There must be someone who will buy...

The answer is whoever has the cash, and whoever thinks that propping up a failed state is in their benefit.

If there is no surplus capital there is only default, or inflation. Sorry, but math trumps expectations every time.

with the powers that inhere only to governments, to insure not only continuity of operations, but an orderly transfer of the bank to its creditors, to its bond holders:

Those powers will "inhere" just as long as the governed allow it -- and no longer. I'm sure the U.S. Government has enough firepower to force us to "allow" them for quite a while, but their "moral force" -- if such a thing really exists with governments, and I'm certainly beginning to question that assumption-- has evaporated.

The gov't did this before with AT&T and Standard Oil. They can do it again. Nationalize BOA and Citi by FDIC closure, and spin off the deposit/personal/business banking into new regional companies with a share of inherited debt. Split off the othere business, and either collapse them wholesale (investment arms) or spin if them off if there isn't a willing buyer.

Marking to market and selling off assets would take of the investment assets, while haircutting investors to zero and bond-holders to match asset values would keep taxpayers whole.

Seems unpleasant, but how else do you eat a zombie elephant but one bite at a time?

Marking to market and selling off assets would take of the investment assets, while haircutting investors to zero and bond-holders to match asset values would keep taxpayers whole.

Marking to market is a big part of the problem, not a solution. The problem is that the market can be panicked (and it has been recently), such that formerly viable enterprises can suddenly find themselves underwater when there assets are revalued at firesale prices. This is a big part of why it is so hard to unwind this mess, send the wrong signal, and an otherwise viable business can go under due to a run on its stocks, and of its customers. There are many different ways to compute insolvency. Mark to market is too draconian, and unstable. It might even be vulnerable to unscrupulous operators. A better standard would be to compute the present value of the assets (a time discounted summation of the incomes the assets are expected to pay). Then we have the fact that a corp insolvent under my second definition of the term, could still survive if it continues to collect other revenue in the meantime. Choosing too stringent a standard only amplifies the scale of the disaster.

The totals lost by bad loans, are much smaller than the totals that have been lost to the economy overall. A couple of trillion only. Yet, losses in the equity markets are several times that amount.

You can state that the assets are undervalued but that doesn't make it so. It is possible that the market is overvaluing these assets, that future incomes derived will be even lower that the current market value implied. What you are advocating is just another wave of accounting fraud IMO.

Like I was implying, all you have to do is start a rumour to create a temporary run on a companies assets. Then when it goes under, you buy it up for pennies on the dollar. Find another corporation, rinse and repeat. Clearly a whole lot of this wouldn't have gone south without high leverage, but at this point that is water under the bridge. The reality is that we can all be hurt by the malfeasance -or simple bad judgement of others. The goal should be to minimize the amount of damage that accrues to the innocents. Applying moral absolutes will only worsen the end result.

enemy, what you're saying is true, but you continue to focus only on our current downside risk. Nobody cared so much when those rumors you speak of were used in pump 'n' dump schemes - what the heck, as long as we were all making "money," right?

The markets were just as fragile on the way up the bubble, witness that a single errant comment on "irrational exuberance" was enough to spook us (briefly) by the millions. But thank g_d, the engine of greed took over again and we were off to the races once more.

What I'm saying is, so what if bank nationalizations trigger an overcorrection? Isn't that the best way to find the floor, and build a new equilibrium?

Any item is worth what you can sell it for. There is no "undervalue", just its value. If it's worth more to you than it's price, then buy it (if you have the cash). If it's not, then sell it.

The fact that markets can panic does not change that reality. That's why conservative debt ratios and lending standards are needed for banks, and why investment houses make money -- some institutions can tolerate loss and risk, others can't.

The Obama White House may come up with euphemisms for nationalization (temporary receivership, anyone?). But whatever it’s called, what will it mean? The reason why the White House has been punting on the new installment of the bank rescue is not that the much-maligned Treasury secretary, Timothy Geithner, is incapable of getting his act together. What’s slowing the works are the huge political questions at stake, many of them with consequences potentially as toxic as the banks’ assets.

Will Obama concede aloud that some of our “too big to fail” banks have, in essence, already failed? If so, what will he do about it? What will it cost? And, most important, who will pay?...

We are now waiting to learn if Obama’s economic team, much of it drawn from the Wonderful World of Citi and Goldman Sachs, will have the will to make its own former cohort face the truth...

Nationalization, unmentionable only yesterday, has entered common usage not least because an even scarier word — depression — is next on America’s list to avoid.

I cannot recall who I was listening to or reading recently - heck it might have even been a DB - but the comment was made that only the entity who had the "bank charter" could be nationalized. For example there is "the bank" which is part of some Citi holding company.

I know this does not answer your question, so I suppose it is an attempt to clafiy for these mutli-national conglomerates whether it is the US chartered bank that gets nationalized or not.

Granted - even at that - the effect on the conglomerate will be significant.

Michael Mazar, a BMO Nesbitt Burns analyst who follows oil-field-services companies in the province, said the government's unemployment forecast is “way out to lunch.”

By Mr. Mazar's calculation, employment is down more than 15,000 in oil-and-gas drill-workers alone this year – and that doesn't count “the guy who works at the quad dealership in Grande Prairie,” he said. “You don't need him any more because the rig workers aren't buying quads. Who knows what the trickle-down effect is, but it's way more than 15,000.”

"the province [Alberta] was in a recession with the Progressive Conservative government forecasting a more than $1-billion deficit"

Technically the deficit refers only to current income. The Tories will make up the difference out of the Heritage Trust fund. Alberta is not going the way of California.

Unemployment in Alberta last month was 4.4%. The layoffs are mostly concentrated on expatriates, who then head back east to Ontario and Newfoundland, to be counted in the statistics of those provinces.

The 7-Eleven index (Help Wanted signs in front of their convenience stores), which I use as an indicator of Calgary's economic climate, has declined from $11/hr plus retention bonus to $9.50/hr for clerks, and about 50% fewer signs out front.

Do you know if any 7-Eleven cashiers are volunteering to have their pay cut from $11/hr to less than $9.50/hr [seems unlikely]? Or does the franchise owner just find some excuse to fire them so he can then hire a cheaper/hr replacement?

Or do they just get a pay cut without volunteering? Plenty of people are there, and you can't really blame the businessman. Convenience stores are going to be hard hit, unless they are the only store for a locale.

I think it's laughable that bankers get bonuses to not leave, when there isn't a job in the world that pays like that for then to leave to, and there can't be many competitors that are hiring. It's downwards pressure everywhere......except gov't jobs of course.

Not true...salaries are being cut in my wife's office (public defender) and layoffs are taking place. Caseloads are increasing. It was either Frontline or 60 Minutes that profiled a public defender in Miami Dade country who had >1500 cases. He would meet them for the first time at their day in court along with the other twenty cases he had to deal with that day. The future for the government worker is more work per person and a little more security than the private sector.

Tax revenues are going down everywhere and the local population is insisting on bringing down costs rather than finding creative ways (i.e. debt) to keep the payroll at the same level.

Very few sectors will emerge unscathed, although there will always be people within sectors that will do better than others (i.e. the bank chiefs).

Agreed. Government jobs are not immune. New Jersey has joined California in furloughing state workers. The governor of NY is asking for another "lag payroll" - kind of like a furlough, only there's no time off and you get the lost pay when you separate from state service. State and local governments all over the country are asking their workers to take pay cuts or forgo previously agreed-upon raises, and to pay more for health care and retirement plans.

When did Former President G.W. Bush ever declare that he wanted to halve the deficit?

When did G.W. Bush ever admit to making ANY mistakes?

All he and his puppet-master Dick Cheney ever did was hide behind the 'We are at War'(of their own choosing) and 'Support the Troops' (they didn't) B.S. as an excuse to funnel ridiculous sums to our defense contractors. And the so-called 'Surge' had/has a whole lot to do with pallets of new, crisp, shrink-wrapped 100-dollar bills being flown over to the Iraq to bribe people not to kill us and each other. Lots of those pallets have been flown to the 'Stan as well to buy cooperation, as well as our kindly turning of a blind eye to the hugely increased opium trade there. So much for the Republican morale high ground concerning the 'war on drugs'. Just like in Nicaragua before, we make deals with the devil to 'win' our global game of 'Risk'.

Part of the President's plan is to let Shrub's tax breaks for people who make over 250K/yr expire, thereby effectively raising taxes on those people. So, now just wait about an hour to start to hear the howls of the oppressed Republican talking heads, with their talking points, go rabid about how these tax increases will destroy the Republic and Doom the free world as we know it. These are the same clowns who howled about the stimulus package raising the debt (conveniently ignoring how Ronnie Raygun greatly increased debts and deficits, as did Shrub...and Bill Clinton, forever vilified by his adulterous ways, never lied to start illegal wars and never sent anyone to die for false reasons and didn't implement tax breaks for the wealthy and managed to run a year-to-year budget surplus.

So let me recap here: Republicans give any type and magnitude of spending a free pass, as long as it is stamped 'National Security' (DoD, Department of Energy (not civilian energy mind you, DHS, CIA, NSA, EIEIO.) and don't believe in paying for any of their corporate (military-Defense-Finance) welfare with taxes but by issuing debt to the World, but chafe when actually asked to pay for any government expenditures with taxes and scream about any government spending that isn't about buying weapons, bribing dictators, spying on own own citizens, and so forth.

Got it.

The DoD is in a big nutroll right now, with the Services jockeying for position to claim all the booty they say we need to keep the yellow/swarthy masses from taking over the World: More f-22 Raptors, the 'Next Generation Bomber, 100 to be field with an IOC of 2018, so secret that there is NO public oversight about how much this beastly costs, new post-Nimitz-class (Gerald Ford Class) aircraft carriers, new cruisers, new destroyers, and a nifty new line of SSBNs and a bright shiney new missile for them to carry! Yes, the Navy has plans for new Armageddon boats to ply the undersea boxes through the year 2100! And don't forget the US Army, pushing the 'Future Combat System', which is actually a system-of-systems comprising about 18 different weapons systems and all the Skynet-like battlefield networking to go with that...and powered armored suits kind of like Starship troopers tom boot! All this at incredible estimated costs, which will as sure as the Sun keeps rising will triple or quadruple over time. Yes, there is one sector of our economy that isn't worried: Boeing, Lockheed-Martin, Northrop-Grumman, BAE, Raytheon, SAIC, GE, ITT, and on and on.

With all the hullabaloo about the right-wingers setting up web sites to track where every last dime of stimulus money is going with the promise to vilify the President and Congress is one buck isn't accounted for (BTW the President already beat them to it and promised a government web site to track the expenditures), where are the right-wingers on the idea of tracking government expenditures for the Department of Defense, Department of (white-hot fireball) Energy, the Department of Homeland Security, the FBI, and the various intelligence agencies? Oh no, the little old ladies driving to and fro from the mega-churches (onward Christian Soldiers, Marching as to war, I know it well)with the faded 'Support the Troops' magnets on their SUVs (sucking oil from the ME and funding their hatred of us) wrinkle up their noses and say 'that is none of our business, the government has no obligation to tell us those things' (spending about national security).

Go rent Three Days of the Condor and pay attention to the last scene: When the stuff starts running out, the People won't care how we get it for them...they just will demand that we get it for them (see Tricky Dick's line about the American Way of life being non-negotiable). Even President Obama kow-towed to that line of crap by asininely saying that Americans don't have to apologize for their way of life.

Washington, Feb 03: Taking credit for the strong and lasting growth of the American economy, President George W Bush on Saturday pledged to submit a budget to Congress that will eliminate the deficit by 2012.

I agree that, in regards to fiscal policy, Obama seems to on much firmer ground than with his bank bailout policy:

The president will propose to tax the investment income of hedge fund and private equity partners at ordinary income tax rates, which are now as high as 35 percent and could return to 39.6 percent under his plans, instead of at the capital gains rate, which is 15 percent at most.

Mr. Obama will also call for letting the Bush tax cuts on income, dividends and capital gains lapse after 2010 for individuals who make more than $250,000 a year. But while the top rate for income would rise to 39.6 percent, the top rate for capital gains and dividends would be 20 percent.

As a candidate, Mr. Obama called for immediately repealing those tax cuts. He decided instead to keep them in place through 2010, as scheduled, reflecting the widespread belief that raising taxes further depresses economic activity.

I still don’t see how taxing worked-for income at a greater rate than non-worked-for investment income (dividends and capital gains) can be justified, nor how it’s good for society to let fortunes pass from one generation to the other largely intact. But at least Obama does seem to be moving in the right direction, although not as quickly as he promised during his campaign.

I still don’t see how taxing worked-for income at a greater rate than non-worked-for investment income (dividends and capital gains) can be justified, nor how it’s good for society to let fortunes pass from one generation to the other largely intact. But at least Obama does seem to be moving in the right direction, although not as quickly as he promised during his campaign.

If you don't correct for inflation, than capital gains are partially (sometimes more than wholly) illusory. Of course the correct way to do it should be correct for it. As someone who as tried to save earned income to generate a stream of investment income, being taxed both before, and after investing makes it almost impossible to get ahead. I am agreed (partially), about letting fortunes build up from generation to generation. To a limited degree I think that is a reasonable thing to allow. But taking a modest percentage of large fortunes when they are transferred to the next generation is probably a good compromise.

i dont know what bush claimed except that i recall a claim that the budget deficit had been cut in half, i think that was about '04. but that was accomplished by ignoring "off budget" items like the search for wmds and ignoring the money "borrowed" from the ss "trust" fund.

BIG difference between budget deficit and anything meaningful. the real deficit is easy to calculate after the fact, just calculate how much the debt has increased.

and by that measure, bush essentially doubled the debt from $5.7 trillion to $10.6 trillion in just 8 yrs. some great financial managers, the republicans.

When Carter was president, debt as % of GDP was flat.
When Reagan was president, debt as % of GDP rose.
When Bush I was president, debt as % of GDP rose.
When Clinton was president, debt as % of GDP fell.
When Bush II was president, debt as % of GDP rose.

Of course, you should look at both Congressional make-up and President when examining how the budget is shaped and passed.

I think the debt pattern of Obama's administration will more closely resemble Reagan's than Clinton's.
Unfortunately.

Reagan not only inherited the Carter deficit, he raised it to new and unheard of levels. The Reagan and Bush years will hopefully go down in history as the worst fiscal disasters in the history of the US. May some Supreme Being help us if they are not the worst, as we will not survive as a Nation otherwise. They showed the US why you save up a few acorns for the bad times, even if you do manage to hand the baton to someone else, who is doomed to failure unless the American people "gut up" and dig our country out of this mess.

Both parties ignore the entitlement trusts when talking budgets. Any predictions for what the debt will look like in 2016?

Given the fact that these are almost entirely (SS is managable) due to medical care, they are just another manifestation of the fact that we can't allow our out of control system of funding medicine to continue. The exponential growth of an already astronomical expense is something we just can't afford to let continue.

Both Social Security and Medicare are on-budget revenue and expense categories. The Social Security surpluses are covering of the costs of the Federal General Fund which is covered. Just try to get anyone in the Federal Government to even discuss taking them off-budget.

I called in years ago to C-Span when Rep. Jack Spratt was the guest, and when I asked about taking SS off budget, it appeared that he was going to have a heart attack. A normally well-spoken man, Rep. Spratt stuttered and stammered and declared that an impossibility. It was also the only time I was able to get through to C-Span, which I no longer watch.

Obama's proposal for the 2010 fiscal year that begins Oct. 1 projects that the estimated $1.3 trillion deficit he has inherited from former President George W. Bush will be halved to $533 billion by 2013.

The baseline that Obama's quoting contains a hefty amount of stimulus spending. The official 2008 (fiscal year Oct07-Sept08) deficit was $455B. "Bush's" (I put that in quotes, because gee... perhaps Congress might feel some ownership in the deficit as well?) 2007 FY deficit was $162B. The 2006 FY deficit was $318B. Those 3 years had seem like they should be fairly representative of a winding down Iraq and a post-financial-meltdown world, wouldn't you think?

So averaging the three pre-financial-meltdown deficits = $312B. Obama's "lofty goal" is, by 2013, to bring the deficit back to 71% more than the pre-meltdown numbers? I guess I'm not impressed.

The problem is that those smallish deficits were based upon an economy which was puffed-up via the various bubbles. Now that we are going to have to live without the huge stimulus caused by the blowing of bubbles, things have ratcheted down to a much worse point. Think of the recession as the transition (probably with overshoot) to the new lower level of national wealth.
We simply have to fix the exponentially exploding health care issue -and dramatically cut military expenditures. Clearly Obama thinks that he doesn't dare broach the idea of seriously cutting the military, so we are stuck in an intractable situation. Until we can convince the people that we can not onger afford to be the worlds big dog, there is no hope of fixing things.

My solution is to place a large tax on transport fuels, using the proceeds to fund the DOD (including the "Black" programs). Then, just let those conservatives complain! As folks in the U.S. begin to use less gasoline, diesel and kerosene jet fuel, the DOD budget would shrink...

Kyoto trading credits were handed out and might be taken away gradually until nations emit 50% less carbon by 2050. This is a gradual drop in hydrocarbon use by more than 1% a year. As the carbon credits become scarcer every year, Russia decided to stop selling carbon permits as it needs them for its own people. In Italy power blackouts are becoming more frequent. Germany has been increasing electricity imports also. New energy intensive manufacturing capacity in Europe is severely restricted. The Kyoto plan resembles a decades long shrinking of growth in Europe. A super-recession. Meanwhile China without carbon restrictions and license to burn high sulphur coal is seeing the upper class fill with millionaires and the wages of the poor raised up. Carbon cap trading has the potential to bring 40 years of decreasing economic growth to the world, except areas not signing up for it.

. . . empty neighborhoods are becoming an increasingly daunting problem across the country. The national rental vacancy rate now stands at 10.1 percent, up from 9.6 percent a year ago; homeowner vacancy has edged up from 2.8 percent to 2.9 percent. Richmond, Va.'s rental vacancy rate of 23.7 percent is the worst in America, while Orlando's 7.4 percent rate is lousiest on the homeowner side. Detroit and Las Vegas are among the worst offenders by both measures--the Motor City sports vacancy rates of 19.9 percent for rentals and 4 percent for homes; Sin City has rates of 16 percent and 4.7 percent, respectively.

Adverse possession is pretty complex law -- not just anyone can drop down anywhere and claim adverse possession if no one objects. But I'm sure you are right -- this is pretty well covered in Mike Davis' Planet of Slums. Displaced people will overwhelm any attempt to keep them out of empty shelters. But it won't really be a solution, just more of the same old problem.

Twenty-something years ago when an agronomist friend did his postdoc in Medellin, Colombia, he described to me something very much like this:

"Displaced people will overwhelm any attempt to keep them out of empty shelters."

In Colombia, large numbers of the homeless gather spontaneously outside the fences of large landholders, and when critical mass is reached, they just push the fences down and walk in. They camp, then they erect cardboard shacks, then dig drainage ditches, and it all becomes established over time. Eventually the local government runs power lines and plumbing into the new barrio.

There's no way to corral or drive out so many people - they'll return as soon as the authorities leave anyway. Besides, people have to live somewhere, and for the government it's better than facing a revolution of starving peasants.

The landholders aren't compensated, but then again they usually got the land for next to nothing to start with. Maybe it makes a kind of sense, that an arbitrarily large landholding can't necessarily be secured by an absent owner. It seems to be the way we're headed, for better or worse.

California has returned from the dead before, most recently in the mid-1990s. But the odds that the Golden State can reinvent itself again seem long.

PBS's American Experience profiled the California Gold Rush. I found it fascinating to discover how much that event colored California's perception of itself, and in turn, reshaped America's self-identity at home and abroad.

...Down in the crowded bars,
out for a good time,
Can't wait to tell you all,
what it's like up there
And they called it paradise
I don't know why
Somebody laid the mountains low
while the town got high...

Where the pretty people play,
hungry for power
to light their neon way
and give them things to do

Some rich men came and raped the land,
Nobody caught 'em
Put up a bunch of ugly boxes, and Jesus,
people bought 'em
And they called it paradise
The place to be
They watched the hazy sun, sinking in the sea...

They call it paradise
I don't know why
You call someplace paradise,
kiss it goodbye

Zbigniew Brzezinski, a former national security advisor, has warned that the US could witness riots if economy continues its downward spiral.

"There's going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots!" said Brzezinski, President Jimmy Carter's national security advisor, in a recent interview with NBC.

"In 1907, when we had a massive banking crisis, when banks were beginning to collapse, there were going to be riots in the streets," he added.

At least 3.6 million jobs have been wiped out throughout the US since the recession began in December 2007. The jobless rate officially reached a 16-year high of 7.6% (11.6 million people) last month.

Earlier this week, a new Federal Reserve report said that US unemployment could increase to 8.8%, causing the economy to contract for a full calendar year for the first time since 1991, when a contraction of 0.2% was registered.

The Obama White House has put forward an array of measures, including a $787 billion stimulus package, in the hopes of reviving the flagging economy.

Brzezinski, meanwhile, made some recommendations to the young administration.

He proposed the creation of a voluntary national solidarity fund, whose contributors would be those who became wealthy in recent times.

"Where is the moneyed class today? Why aren't they doing something: the people who made billions, millions. I'm sort of thinking of Paulson, of Rubin [former treasury secretaries]. Why don't they get together, and why don't they organize a national solidarity fund in which they call on all of those who made these extraordinary amounts of money to kick some back?" he argued.

"I was worrying about it because we're going to have millions and millions of unemployed, people really facing dire straits. And we're going to be having that for some period of time before things hopefully improve," said Brzezinski.

Remember that Zbigniew Brzezinski was the founding director of the Trilateral Commission, that global free trade group of the best and brightest insiders from around the World. I think it was closely related to Nelson Rockefeller's Council on Foreign Relations. Lots of folks who think Jimmy Carter was an outsider don't know that he was a member of the Trilateral Commission. About 100 people from North America belong, with similar numbers representing the rest of the world. When Carter took office, about 50 of the membership of the time entered his administration.

Brzezinski is out of touch with the average American. His outlook is colored by his Polish background.

Americans are not like the Poles. I learned this during the Vietnam War era when it took 250 dead a week to get the country agitated against the Vietnam war. Even then, most still supported the war.

Americans in general are not riot prone. They are a passive lot. Many do not even vote. I myself quit voting when the country chose Nixon over McGovern. I thought any country that would pick a Nixon over McGovern was hopeless. I only resumed voting because of the feckless, clueless "W".

They tend to blame themselves for not being able to find a job. They are pretty much people of faith and will believe whatever their leaders tell them. If they disagree, they keep quiet for the most part although that has changed somewhat lately with the advent of the the internet.

Most are glued to the mind numbing cable and broadcast TV programing. They are fascinated by sports, action shots and nanosecond sound bites. They never learned to reason much or think very hard.

They will not riot because they are lazy and it would be too much work. And they think little would be gained. They are right.

In the UK, they certainly see the possibility of civil unrest, especially with a government on the nose as much as Brown's NuLabour.http://www.guardian.co.uk/uk/2009/feb/23/police-civil-unrest-recession

Rick Santelli is back in the news today. Now he's being lionized by the left:

Though he demonstrated in the campaign that he has a rare gift for inspiring the country with new belief in itself, Mr. Obama has not yet captured either the grit the moment requires or the fury it provokes. He has not explained in a compelling way why Americans who followed the rules need to sacrifice more to help those who flouted the rules.

That is why the CNBC reporter Rick Santelli struck a populist nerve with his screed about the unfairness of responsible homeowners picking up the tab for irresponsible homeowners — following the unfairness of taxpayers who are losing jobs, homes and savings propping up the exact same bankers and carmakers whose greed and myopia caused the economy to crash.

He spoke for those who want a pound of flesh. With the Wall Street bailout, Mr. Obama at least gave bankers a bit of the belt, and capped their pay. But homebuyers who wanted more than they could afford seem to be getting a free ride.

Americans are right to wonder why there has been scant punishment for the management and boards of bailed-out banks that recklessly sliced and diced all this debt into worthless gambling chips. They are also right to wonder why there is still little transparency in how TARP funds have been spent by these teetering institutions. If a CNBC commentator can stir up a populist dust storm by ranting that Obama’s new mortgage program (priced at $75 billion to $275 billion) is “promoting bad behavior,” imagine the tornado that would greet an even bigger bank bailout on top of the $700 billion already down the TARP drain.

There's been some discussion recently, about how the Obama administration has made u-turns on some policy decisions. Denninger pointed out a Times of London article that explained the reason the new bank bailout plan was so lacking in detail, disappointing investors and juicing the current downturn in stocks. They changed their mind at the last minute, deciding that the taxpayers needed more protection.

I don't think it was sudden concern over the taxpayers that caused that. It was the sense that people were so angry they couldn't force them to swallow another bailout like the last one.

Could it be that Obama himself was opposed to the terms? Seems he had a flash of anger about the parties and jets with TARP recipients. Given his background he may not be able to easily stomach the 14 million dollar bonuses when millions are slipping over the unemployment brink.

Billions given to banks with market caps of a few billion, not sustainable. Also he may need to hear how much bigger the mortgage hole is. If it's 2 trillion it's unfinancable so the bailout may be on hold while the quasi-nationalization and mortgage cram down ideas percolate.

I don't think it was sudden concern over the taxpayers that caused that. It was the sense that people were so angry they couldn't force them to swallow another bailout like the last one.

I'll take it! If an angry mob led by people like Denninger are able to force Obama and his little troop of Nihilist Kings into doing the right thing, at least it's showing that Obama's not completely brain dead like Bush.

From what motive but fear, I should like to know, have all the improvements in our constitution proceeded? If I say, Give this people what they ask because it is just, do you think I should get ten people to listen to me? The only way to make the mass of mankind see the beauty of justice is by showing them in pretty plain terms the consequences of injustice.

Santelli, Kudlow, Cramer, Orman, and the rest of the CNBC dumb you-know-whats fanned the bubbles with their endless Goldilocks ecomony. Let me think of a few a their finer moments.

How about when Mellisa Francis thought packing bubbles were filled with Natural Gas because Dell said packaging costs were going up with the price of NG.

Cramer telling people not to sell Bear Stearns.

Dillon telling everyone that all the LBO deals were going to get done and that the Subprime Panic was overblown.

These guys have no room to talk about anything. Read the end of this post under Sublime for a rational discussion, because believe me, when you start agreeing with CNBC, you've made a serious error in your thinking. You all realize they work for GE which sells a lot of crap around the world and is a TARP recipient.

The dismal housing market dragged down fiscal fourth-quarter profit at Lowe's Cos. by 60%, and executives at the home-improvement chain said Friday that they saw little hope of a substantive fix from a federal effort aimed at helping struggling homeowners.
---------------
I would imagine the same applies to Home Depot, Ace, and True Value hardware stores.

Thus, it appears that most employed Americans have no idea of the tax-free savings that can be had by minor efforts at greater self-sufficiency [or just too busy watching movies, sports, etc.] You would think these companies would be actively promoting Peak Outreach to the max to juice their sales. Instead, these companies are acting more like a deer caught in the headlights.

And in another corp. Loew's is now trading at 35% below asset value. Ticker symbol : L. Stock price has fallen 56% since last June. It is a conglomerate which owns large chunks of Diamond Offshore, CNA property insurers, Boardwalks Pipeline , and Lorillard tobacco. Baron's considers it a good bullish investment.

Outside of the TOD readership, I doubt it. Especially when times are tough and people get stingy, who wants to spend money by buying "premium" products that will cut your expenses down the road? Money in the pocket rules, and future cost savings is too theoretical. Yesterday I did my part for green stimulus, trading in my wifes SUV for a hybrid. But again, the number of people who have figured this out is pretty small. The price of PV panels is expected to collapse this year. Keep your eyes open, there may be some bargains available.

Lowes has positioned itself to market to upscale suburbanites who want to make their homes look nicer. Their store decor, advertising, even products carried, all look nicer and more upscale than Home Depot. Nicer looking homes are very much a discretionary thing, and can be postponed when times are hard.

Home Depot doesn't seem to have positioned itself in exactly the same way. It has always wanted to be THE DIY Mecca, and has always been just a little more user friendly for the average guy that just wants to repair something in their home. I shop both, but more often I find what I need at Home Depot, and it is the place I go to first (if I can't find it at my local hardware or garden store).

http://blogs.computerworld.com/microsoft_to_laid_off_workers_you_owe_us_...
---------------------------
How's this for adding insult to injury: Microsoft has asked some of its 1,400 recently laid-off workers to pay back some of their severance pay because the company accidentally overpaid them.
---------------------------
IMO, Microsoft, who doesn't have a very good reputation anyway, would have been much better off, public relations wise, by not trying to get this money back.

IMO, Microsoft, who doesn't have a very good reputation anyway, would have been much better off, public relations wise, by not trying to get this money back.

You could make the same argument that neocons were making to defend the mistreatment of muslims. They aleady hate us, we can't possibly make it any worse! So perhaps they value the few dollars they may get back, more than yet another hit to their reputation. Perhaps we only have two sorts of people regarding M$, those who have hated them for years (and avoid using their products), and those who think they are the greatest company ever -and no amount of bad business practices, or shoddy product, or security issues causing great harm will ever change their minds.

BERLIN: The leaders of Germany, Britain, France and other European nations called Sunday for the resources of the International Monetary Fund to double, to $500 billion, to help head off new problems in countries already hit hard by the global economic and financial crisis.
--------------------

Taxpayers Could Own Up to 40% of Bank's Common Stock, Diluting Value of Shares

Citigroup Inc. is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation.

While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup's common stock. Bank executives hope the stake will be closer to 25%, these people said.

Any such move would give federal officials far greater influence over one of the world's largest financial institutions. The proposal was made by Citigroup to its regulators. The Obama administration hasn't indicated if it supports the plan, according to people with knowledge of the talks.

For an aggressively mismanaged company, having shareholders retain value and bondholders be supported, along with exec mgmt, with continued public investment is the epitome of moral hazard.

The only viable solutions are to liquidate these companies and invest in those few smaller banks who actually hold mortgages and deal with commercial borrowers and individuals, and who are at least borderline solvent.

The way this is working out, those banks that are borderline will refuse gov't help to avoid the attached strings, while those that are insolvent will squander the public funds. Neither is a good result, IMHO.

The basic concept of this is good, divert a significant amount of money and resources toward non-petroleum based transportation systems. The method of making it happen ignores the very important consideration that the government is not an ally to society. Government is and has been actively stealing from society and hamstringing efforts to allow us to become less oil dependent.

They forced us to dump money into ethanol with the full knowledge that it is a net energy loser. They subsidize the theft of oil from nations like Iraq, using tax money that could otherwise have been used to develop our non-oil technologies. They tore up and destroyed light rail systems. They used tax money to subsidize the oil based transportation infrastructure like highways when railways would have been much more efficient. Airlines are subsidized even though they are incredibly inefficient, to add insult to injury the majority of airtravel is done by the wealthy while the taxes used to subsidize it is still taken from the poor.

Government has shown no inclination whatsoever to act as an ally in the effort to get off oil. They are unwilling even to publicly acknowledge the problem. If huge sums of money is taken away from gas purchasers that money will surely be wasted by government. Everyone here seems to be willing to face up to hard truths, but all too many of you still somehow believe that government can be trusted even though at every turn they have cheated and betrayed all of us and will continue to do so just as surely as the oil of the world will be burned up leaving us high and dry.

Ultimately we will be dependent on ourselves, local communities and businesses. The large scale political entities of the world are unrecoverable.

Calls in Harare for the deportation of President Robert Mugabe's daughter from Hong Kong, where she is studying for a university degree, have turned violent.

Sixty university students have been jailed after clashes with Zimbabwean riot police during rolling demonstrations that started last week. They demanded the expulsion from Hong Kong of 20-year-old Bona Mugabe. The students were also protesting against mounting economic hardship and what they called the "dollarisation of education".

.."Why is Bona not attending Lupane University or Midlands State [University]?" asked Clever Bere, president of the Zimbabwe National Students' Union (Zinasu). "Zinasu is urging the University of Hong Kong to deport Bona Mugabe, who is pursuing her studies there. She must come back home and face the same conditions that fellow Zimbabweans are facing in these difficult times. We are incensed by the high level of police brutality," the student spokesperson said.
--------------------------

Just a WAG Marvin but I think Kuwait probably has their own numbers in hand. Actually $2.4 million isn't all that much. Just a wild suspician on my part: this is actually an outside audit they are doing to satisfy the lending community. When prices were high the capital sources were much freer with the $'s. Now they want to make sure the reserves are there to back up their loans. Sooner or later everyone reaches PO...even Kuwait and the KSA..

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“Of all races in an advanced stage of civilization, the American is the least accessible to long views… Always and everywhere in a hurry to get rich, he does not give a thought to remote consequences; he sees only present advantages… He does not remember, he does not feel, he lives in a materialist dream.”